Skip to content

The role of active in
today’s portfolios

Insights from the portfolio manager’s office

Feb 15, 2017

Portfolio managers Dennis Stattman and Russ Koesterich discuss how Active plays a critical role in today’s portfolios.

Dennis Stattman shares his experience on how he used active and passive strategies when he started his career working for a pension fund to achieve investment objectives in a cost-effective way.

  • View transcript

    Russ Koesterich: Dennis, 2016 was yet another year where we saw a massive migration to ETFs and passive. Broadening out your thinking from Global Allocation to just the question of active. How do you think about this going forward? Is there still a place for active? How should advisors think about combining active with ETFs?

    Dennis Stattman: You know, it’s ironic Russ. I started out my first job out of business school. I worked for a pension fund. And back then, we were using a combination of active and passive. And frankly, we used passive in order to keep our blended fee down. But, we used active for seeking superior returns than we could get from indexes alone. And it’s ironic, after these many years - and I don’t want to admit quite how many years it has been – this question is still in front of investors. One of the things that has changed is that ETF providers offer a much broader set of products at very low fees. And these were not really, so easily available to investors years ago.

    And so investors have more building blocks but they cannot do some of the things that we can. So, for example – we can get below the index level, find individual securities that offer unique opportunities. And also, we are not limited by just what somebody else has thought of for building blocks. We can go anywhere in the world for stocks, bonds and cash equivalents. Whether it is individual securities, whether it is currency hedged or not hedged, whether it is local shares or ADRs (American Depository Receipts). We have a tremendous set of things to choose from and we can put those together in a way that gives investors what we think is a superior risk-reward trade off.

    Russ Koesterich: Obviously, it is something that is valuable in any market conditions. It seems to me that, where we are in the market cycle - with valuations stretching at lot of places, with asset classes like emerging markets where you want exposure to some parts of it but may be not others – that becomes even more valuable.

    Dennis Stattman: Well, we think selectivity is critical today. Now, we have been blessed and I mean truly blessed by having a 35-years bull market in bonds from 1981 to 2016. My personal view is bull market in bonds is over. We have also been blessed by a strong bull market in stocks from 2009 until the present. And there is nothing like bull markets to make investors feel good and confident. But they don’t last forever and when those bull markets are over then selectivity becomes more critical than ever. And downside protection, is the most important thing for investors. And, it’s not so easy to get that with indices.


Global Allocation Fund

Multi Asset

Morningstar Rating


Net Asset Value ($)


Total Returns (%)

Morningstar Rating

Dennis Stattman, CFA
Portfolio Manager, Head of the Global Allocation Team
Dennis Stattman, CFA, Managing Director and portfolio manager, is head of the Global Allocation team within BlackRock's Multi-Asset Strategies Group.
Russ Koesterich, CFA
Portfolio Manager, Global Allocation
Russ Koesterich, CFA, JD, is a Managing Director and portfolio manager of BlackRock’s Global Allocation Fund. The team is part of BlackRock's Multi-Asset Strategies ...